Naira depreciates as central bank moves to intervene again

The naira on Wednesday depreciated sharply to N465 per dollar in the parallel market due to upsurge in demand for dollars importers travelling to China.

Investigations revealed that the parallel market exchange rate rose from N448 per dollar on Tuesday to close at N465 per dollar at the close of business on Wednesday, indicating N17 depreciation.

It was gathered that the market experienced upsurge in demand for dollars on Wednesday for end-users travelling to China for import business.

A Bureau De Change Chief Executive who spoke on condition of anonymity said the number of end-users travelling to China for business purposes has been on the increase since the conclusion of the recent holiday season in China, adding this was the source of increased demand for dollars in the parallel market.

He said the situation is aggravated by the fact that most of the items to be imported are part of the 41 items excluded from the official foreign exchange market.

He, however, expressed optimism that the demand pressure may subside this week in view of the expected dollar sales to the BDCs by the Central Bank of Nigeria on Friday, especially given the increase in number of BDCs accessing the dollar sales from around 2,000 to 3,000.

The parallel market exchange rate had dropped from a high of N520 per dollar on February 20 to N448 per dollar on Tuesday in response to $1.12 billion supply into the foreign exchange market by the CBN.

Since February 20, 2017 when it announced new measures to boost dollar supply and forestall the declining fortunes of the naira in the parallel market, the CBN has intervened in the forex market six times as follows: February 21, $417 million; February 23, $231 million; February 27, $180 million; March 3, $350 million, March 6, N367 million; and on Tuesday with $100 million.

The Acting Director, Corporate Communications Department of CBN, Isaac Okorafor, said the intervention by the CBN was to fund the commercial banks with enough forex to cater for the request of customers to meet personal travelling allowance, basic travelling allowance, medicals and tuition fees.

Commending the move, market analysts observe that it will further create problems for currency speculators who are yet to recover from the sudden appreciation of the Naira.

According to the former Economic Adviser to the President and Minister, National Planning Commission, Prof. Ode Ojowu: “It appears this time around, the CBN has decided to become smarter than the market manipulators, by putting on its cap of authority to look beneath the market forces.”

It will be recalled that the CBN in February 2017 changed its forex rule supply to guarantee supply to both small and the big end-users.

The policy has restored stability and bolstered market confidence, which has ultimately boosted the value of the Naira.

Operators in the market have also commended the efforts of the CBN in ensuring the continuous appreciation of the naira.

This they attributed to good policy and effective communication strategy, which has witnessed increased dollar supply to the market through a deliberate policy of the apex bank.